After almost a decade of negotiations, Australia and China last week ratified a free trade agreement which will see China benefit from easing of restrictions on foreign direct investment.
According to Bord Bia’s Alan O’Brien, who has analysed the implications of the agreement on global beef and dairy, the agreement will have a positive outcome for the country’s dairy sector, which has been maginalised as a major exporter due to a decrease in its overall dairy production. Australia’s competitive position in the Chinese dairy market will improve, especially with regard to New Zealand. Tariffs on Australian dairy products are expected to be brought in line with New Zealand and all phased out by 2019. This deal will also impact Europe’s competitive position across key commodities, including infant formula, according to O’Brien.
Implications for Australia’s beef sector
Tariffs for the meat sector will be phased out slowly over a 10 year period. Last year, Australia dominated China’s beef import market, accounting for 51% of China’s total imports. According to O’Brien, the deal will add to the strong position already held by Australia.
China’s beef & pork offal tariffs
The current general tariff facing Australia ranges from 12% – 20%, while preferential rates for New Zealand range from 0%-2.7%. The rates for Australia will be phased out entirely by 2025, which will have pricing implications for European competitiveness, according to O’Brien.